• 340 days Will The ECB Continue To Hike Rates?
  • 341 days Forbes: Aramco Remains Largest Company In The Middle East
  • 342 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 742 days Could Crypto Overtake Traditional Investment?
  • 747 days Americans Still Quitting Jobs At Record Pace
  • 749 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 752 days Is The Dollar Too Strong?
  • 752 days Big Tech Disappoints Investors on Earnings Calls
  • 753 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 755 days China Is Quietly Trying To Distance Itself From Russia
  • 755 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 759 days Crypto Investors Won Big In 2021
  • 759 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 760 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 762 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 763 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 766 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 767 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 767 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 769 days Are NFTs About To Take Over Gaming?
Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

Prieur du Plessis

Prieur du Plessis

With 25 years' experience in investment research and portfolio management, Dr Prieur du Plessis is one of the most experienced and well-known investment professionals in…

Contact Author

  1. Home
  2. Markets
  3. Other

Are We Seeing a Dividend Bubble?

Given the plethora of market uncertainties, investors have over the past few months started placing an increasing emphasis on dividend yield. In particular, multi-national companies operating in regions or sectors that would enable them to grow dividends over the next few years have gained favor. These so-called dividend Aristocrats have recorded strong relative performance compared with the benchmark indices, as illustrated by the relative price chart below of the S&P 500 High Yield Dividend Aristocrats Index versus the S&P 500 Index.

S&P HYD Aristocrats/S&P500 Index
Source: StockCharts.com

This trend raises the raising the question: Are we seeing a dividend bubble?

I concur with the answer provided from across the pond by David Fuller, co-author of FullerMoney, as follows: "The short answer is not yet, but all good trends eventually develop some bubbly characteristics, of a greater or lesser degree. A number of high-yielding, multinational 'Autonomies' have shown impressive relative strength this year. Two warning signs to watch out for are: 1) trend acceleration relative to their 200-day moving averages; and 2) price-earnings ratios that are clearly higher than most other sectors or the market generally.

"Another test for these shares, for which I maintain current relative strength is understandable, will occur when a stronger overall market environment revives 'animal spirits' sufficiently for investors to chance their luck in small-caps and other laggards."

Also read The Wall Street Journal's recent article, "Dividend Stocks Become the Heroes - Shares Often Derided as for 'Widows and Orphans' Are Outdoing Their Lower-Yielding Cousins".

 


Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

 

Back to homepage

Leave a comment

Leave a comment